EE Times posted an article which shed some light on the cost of producing a wireless Xbox 360 controller. It leaves the factory at 22% of the retail price which is about $11. Although this may come as a surprise, it’s actually not. Since Microsoft loses money on the console itself they have to make up somewhere. Besides, you don’t buy controllers at the factory but in a store, so not every dollar goes to Microsoft.

Bill-of-material estimates for the wireless controller come in at around $11, or 22 percent of the retail price for the product–a far cry from the negative margin of the console itself. While Call of Duty and Madden NFL 2006 may be examples of the obvious profit play, the add-ons in the hardware arena certainly help in the overall equation.